A Firm Is Weighing Three Capacity Alternatives: Small,medium,and Large Job

question 3

Essay

A firm is weighing three capacity alternatives: small,medium,and large job shop.Whatever capacity choice is made,the market for the firm's product can be "moderate" or "strong." The probability of moderate acceptance is estimated to be 40 percent;strong acceptance has a probability of 60 percent.The payoffs are as follows.Small job shop,moderate market = $24,000;Small job shop,strong market = $54,000.Medium job shop,moderate market = $20,000;medium job shop,strong market = $64,000.Large job shop,moderate market = -$2,000;large job shop,strong market = $96,000.Which capacity choice should the firm make?

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Definitions:

Owner's Personal Expenses

Owner's personal expenses are costs that are not related to the business and are paid out of the owner's personal funds, not the business accounts.

Check Register

A record of checks written, deposits made, and balances in a checking account, maintained by the account holder.

New Transaction

An action that records a financial exchange or transfer that has recently occurred.

Add Check

The process of including a new check (or cheque) transaction within an accounting or financial management system, typically for record-keeping and reconciliation purposes.